Three reasons why NFT is the next evolution of art collection
Author: Jieping Zhang, Annie
Since 2021, NFTs (Non-Fungible Token) has exploded in popularity, mesmerizing the general public, artists, gamers and other creatives in the entertainment and media sectors. The media called the popularity of NFTs “strange and iconic”.
It is also shaking up the world of blockchain and cryptocurrency environments. Unlike digital currencies like Bitcoin and Ethereum which are more familiar, and regular currencies like the US dollar, all of which are homogenized, NFTs is an irreplaceable and non-homogeneous exchange token. As long as the currency value is the same, Bitcoin and US dollars can be exchanged or divided into smaller units. But because NFT has a unique ID, it is not interchangeable and divisible.
Everyone wonders why NFTs are ridiculously expensive, what kind of things you can “NFTized”, or whose NFTs are suspected of infringement and fraud. As a veteran journalist and serial entrepreneur who founded Matters Lab, the new decentralised web3 content platform based on blockchain technology, I am passionate about the self-governance of creators for true independence from any platform. Recently, Matters Lab also launched Traveloggers, the first NFT social media avatar to expand private ownership with collective creation, an experiment for mutually beneficial collaboration between content creators and collectors.
In this article, I’d like to share my thoughts on what NFT is, how it works, and why I believe NFT is the next evolution of art collection.
How NFT works
NFT is a value system that you can fill with any content. Like a piece of white paper or a check, it is a blank canvas that can be defined with any kind of content. Since each NFT has a unique ID, there’s no need to go through manual inspection and complicated verification, and they can be automatically read and recognized. This feature makes NFTs a digital container, marking the ownership of native digital assets in a decentralized form.
These digital assets include the most common types of digital content, such as NFT artworks, videos, and even scientific research papers. They also include three-dimensional meta-universe content in life simulation games, such as equipment, land certificates, real estate, and point cards.
Apart from digital assets, NFTs can be filled with conditional instructions, such as a line of “If This, Then That”, and smart contract mechanisms automatically execute them when the conditions are met. This type of instructions are often used in asset transfers, and in a large number of NFT artwork transactions.
For example, when a buyer collects a piece of NFT artwork, the artist can agree in advance that every time the artwork changes owners, a certain percentage of the sale automatically gets transferred to the artist’s BlockChain wallet. Smart contracts automatically handle these operations without intermediaries, eliminating delays and frustrations.
NFT Art Collection
In the past six months, there were some interesting NFT cases that helped us understand and broaden our imagination of NFT applications.
The most classic application scenario is of course: art collection. For those who were confused by the transaction volume of CryptoPunks (i.e., those with low resolution and high prices) surpassing $300 million, the following example can help you understand NFTs a bit better:
On July 16th, the very talented Chinese artist Cai Guoqiang released his first NFT project “Momentary Eternity–The Detonation of 101 Gunpowder Paintings” on the TR Lab online platform. There was fierce competition among NFT collectors, especially in the last hour due to a battle among 3 buyers. Within 48 hours, the project was auctioned at a collection price of 2.5 million US dollars, setting a record for the most expensive auction of NFT artwork by an artist who wasn’t in the encrypted field.
Why are people willing to pay a hefty sum to collect Cai Guoqiang’s (or anyone’s) NFT artwork, rather than a traditional piece of art that you can actually hang in your house? To answer the question, it may help to study the difference between collecting NFT art and traditional art. On the surface, the difference seems to be just moving from offline to online. But judging from the auction of Cai Guoqiang’s works, there are other characteristics that may bring fundamental changes to the art market:
1. Transparency of data
The whole process of bidding and selling NFT artworks is transparent. Data on the buyer (address), the price at which an artwork was sold, and the price at which it can be sold in the future are all written on the Blockchain openly. You also can’t delete the data.
When market activities accumulate, every transaction behavior of each ID will be recorded and disclosed, although cryptocurrency wallet is pretty private as it is (you can’t know who the real person behind the ID is). This means that everyone’s collection/investment credit records can be accumulated, and become one of the public information bases for new entrants to choose their own investment/collection interests.
2. Distribution of profit
From the viewpoint of artists, it can be more profitable to sell their artwork on the NFT market, rather than the traditional auction market. The artist receives the profit of the transaction between them and the collector, including any subsequent change of hands. A smart contract automatically executes buying, selling and profit calculations, eliminating considerable intermediary costs and increasing profit margins.
3. Low barriers to entry
Usually, there’s a high threshold to enter a traditional art auction and collection market, but the NFT market is completely democratized. Anyone can participate in NFT transactions anytime as long as they have a Blockchain wallet. Can’t afford Cai Guoqiang’s 2.5 million US dollars paintings? No worries, there are countless other content assets in the NFT market, ranging from a few dollars to tens or hundreds of dollars.
For these reasons, NFTs have the potential to become a more favorable method of collecting art for various types of art buyers and collectors in the near future. The exciting thing is that it’s not just limited to art. It can be all sorts of content that is transferred over the Blockchain, creating more room for imagination and incentives for both creators and collectors. As the NFT market grows, it continues to innovate the content creation and collection processes, constructing a new world of decentralized ownership.
Stay tuned for my next post, where I explain how NFT is redefining digital ownership in web3.
Interested in NFTs? Our inaugural NFT collection, Traveloggers, can be found at OpenSea here.